Facilities with recourse to British Land

As at 31 December 2011, the Group has secured debt of £1.0 billion comprising secured debentures and other secured debt including

• £0.9 billion of debentures issued by British Land are secured against a single combined pool of assets with common covenants. The covenant requires the value of those assets to cover the amount of these debentures by a minimum of 1.5 times and net rental income to cover the interest at least 1 times. We use our rights under the debentures to withdraw, substitute or add properties (or cash collateral) in the security pool, in order to manage these cover ratios effectively, deal with any asset sales and remedy if necessary

The assets of the Group not subject to any security were £4.2 billion as at 31 December 2011.

As at 31 December 2011, the Group had unsecured debt of £1,500 million comprising

• £533 million of US private placements, issued in full at fixed rates, requiring no amortisation and with terms up to 16 years. British Land currently has three US private placements: £98 million 5.5% Senior Notes 2027, $154 million 6.3% Senior US Dollar Notes 2015 (which is swapped back into sterling at 6.0%) and $480 million issued in 4 series with different maturities, of up to 15 years (which is swapped back to sterling at an all in average cost of LIBOR + 146 bp). Issuing in this market widens the debt investor base
• £966 million of bank loans and overdrafts

Covenants applying across each of these unsecured facilities (having been consistently agreed with all lenders since 2003) are the same:

a) Net Borrowings not to exceed 175% of Adjusted Capital and Reserves
b) Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets

No income/interest cover ratios apply to these facilities.

There are no other unsecured debt financial covenants in the Group.

Although secured assets and other assets of non-recourse companies are excluded from Unencumbered Assets for the covenant calculations, unsecured lenders benefit from the surplus value of these assets above the related debt and the free cash flow from them. During the year ended 31 March 2011 these assets generated £59 million of surplus cash after payment of interest and securitisation amortisation. In addition, while investments in joint ventures do not form part of Unencumbered Assets, profits generated by these ventures are passed up to the Group.

Derivatives, usually interest rate swaps, are used to achieve the required interest rate profile viewed across all the Group debt.

As at 31 December 2011, the Group had cash and short term deposits of £55 million and liquid investments of £200 million. The liquid investments comprise medium term tradeable notes with a fixed interest rate of 4.4% pa.

The Group has significant long-term financing in place: the weighted average maturity of this debt at 31 December 2011 was 9.7 years.

Unsecured revolving undrawn credit facilities

Unsecured bank revolving credit facilities provide full flexibility of drawing and repayment at short notice without additional cost, providing valuable operational support.

• Current facilities amount to some £2.5 billion at floating interest rates based on LIBOR plus an average margin of 45 bps per annum. Some £0.9 billion expire within the next 2 years and some £0.6 billion has a maturity of more than 3 years
• Covenants applying across each of these unsecured facilities (having been consistently agreed with all lenders since 2003) are the same:
  • Net Borrowings not to exceed 175% of Adjusted Capital and Reserves. At 31 December 2011, this ratio was 43%
  • Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets. At 31 December 2011, this ratio was 34%
  • No income/interest cover ratios apply to these facilities and there are no other unsecured debt financial covenants in the Group